Xiaomi earnings prove copying Apple doesn’t pay off

Hugo Barra, former Android chief, now works at Xiaomi. Photo: Xiaomi

Hugo Barra, former Android chief, now works at Xiaomi. Photo: Xiaomi

Xiaomi has quickly become the world’s third most popular smartphone maker, but according to a 2013 financial filing released by the privately held company, it doesn’t pay to copy your way to the top.

In 2013 Xiaomi made a meager $51 million in profit even though it’s valued at more than $10 billion by investors.  The filing reveals Xiaomi’s low profits are on account of the No. 3 smartphone maker’s razor-thin margins. It brought in about $4.2 billion in revenue in 2013, giving the company an operating margin of just 1.8 percent.

Xiaomi has been very outspoken in 2014 about its desire to supplant Apple and Samsung as the world’s top smartphone makers. The company has quickly risen in popularity by offering high quality smartphones at an affordable price, but in the process they’ve come under fire from Jony Ive and other Apple execs for deliberately copying the designs of the iPhone and iPad.

While Xiaomi has been quickly capturing marketshare with its Apple rip-offs, Samsung and Apple are the only two smartphone makers actually making money off the devices. Samsung Mobile posted an operating margin of 18.7 percent in 2013, while Apple reported 28.7 percent ending in September 2013.

Xiaomi’s climb to to the top is still a work in progress though, and many analysts have speculated whether it can succeed in the long-run without generating sustainable profits.

The company’s fast growth took another hit this month after India decided to ban its products due to patent infringement. Rather than pitching itself as a hardware company, Xiaomi insists its an ‘Internet company’ that sells handsets and tablets at cheap prices to distribute its software and services which are the company’s real money makers.

Source: Reuters